What tax adjustments in the 2023 US tax season can help you save on taxes?

Harvest Financial Group Wealth Management

What tax adjustments in the 2023 US tax season can help you save on taxes?

2023 Tax Season: January 24th to April 18th. Understanding the new changes for the 2023 tax season is crucial for your family’s budgeting, savings, and investments. Here are the five key changes for the new tax season.

1. The Internal Revenue Service (IRS) in the United States adjusts federal tax rates annually based on inflation, and the adjustments for 2023 are particularly significant due to the highest inflation rate in 40 years.
The U.S. income tax follows a progressive system, where higher incomes are subject to higher tax rates. For individual taxpayers with income below $11,000, the tax rate is 10%. For income above $11,000 and up to $44,725, the rate is 12%. For income above $44,725 and up to $95,375, the rate is 22%. For income above $95,375 and up to $182,100, the rate is 24%. For income above $182,100 and up to $231,250, the rate is 32%. For income above $231,250 and up to $578,125, the rate is 35%. For income above $578,125, the rate is 37%. If married couples file jointly, the tax rates for each income bracket will be doubled.

2. Tax deductions are also adjusted based on inflation, and for the 2023 tax season, the standard deduction has increased by $900 to $13,850. For married couples filing jointly, the deduction has increased by $1,800 to $27,700. The head of household deduction has increased by $1,400 to $20,800 compared to 2022. Taxpayers who are 65 years old or older or blind may qualify for additional deductions based on their filing status.

3. To combat inflation, the IRS has increased the contribution limits for retirement accounts in 2023, including 401(k) and individual retirement accounts (IRA). The contribution limit for 401(k), 403(b), most 457 plans, and the federal thrift savings plan has been raised by $2,000 to $22,500, with an additional $7,500 catch-up contribution for individuals aged 50 and above. The contribution limit for IRAs, including traditional and Roth IRAs, has been raised by $500 to $6,500.

4. Low to moderate-income individuals can continue to participate in the Earned Income Tax Credit (EITC) program to reduce their tax burden and increase their tax refunds. Eligible childless households can receive a maximum credit of $560 through EITC, while families with children can receive even higher credits. For families with one child, the credit is $3,733, for families with two children, it is $6,164, and for families with three or more children, the credit is $6,935.

5. The “Retirement Savings Contribution Credit” program can also help low to moderate-income individuals reduce their tax burden by up to 50% of their contribution. The eligible contribution limits for individuals have increased by $2,500 to $36,500, and for married couples filing jointly, the limits have increased by $5,000 to $73,000. Individuals with incomes below $21,700 and married couples with incomes below $43,500 can receive a credit of up to 50% of their retirement account contributions.


The above information is for reference purposes only. For specific tax filing matters or retirement plan design, please consult your accountant, tax specialist, and financial planner for professional advice.

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